The Shifting Relation of Law With Decadent Capitalism

Now let us superficially review the contemporaneous behavior of the capitalist mode of production in the United States of America and the capitalist countries bound to the international division of work. This is the predominant mode of production — with some differences according to place and time –- since the culmination of World War II until today. Let us see how this works out in the law superstructure of capitalism.

The Spanish journalist Vicente Verdu, in his book “Capitalism of Fiction” explains how at the beginning it was a capitalism of production, then a capitalism of consumption and finally a capitalism of fiction. In the first stage, productive techniques are created in order to send to the market enough goods to satisfy human necessities. In the second stage, production is enlarged and markets extended. Finally in the third stage, an ample propagandistic publicity show is produced in order to sell the same products with limited differences. Also at this stage, the profit of the means of production of owners are directed towards the financial sector in order to be converted into negotiable papers which begin to pass from hand to hand, increasing or diminishing their initial values because they are sold and bought constantly in search of a profit. This perverse game of offer and demand, in the long run, inflates the titles values that start to differ every time more from the real price of the represented production of goods units. This occurs in such an extended way that if all papers circulating around the planet’s financial market were to be turned into hard currency, we would not find enough dollars to cover the prices fixed by the stock exchanges of the world’s principal financial centers.

Thereafter, according to Verdu’s thesis, capitalism has been necessary for the effective growth of humankind. But by now it seemed to be sustained upon fiction, facts created by the system in order to give an answer to the profits wanted by money owners and factory owners, since they feel that the profit directly emanated from workers’ labor plus-value is not enough.

From its historical emergence two centuries and a half ago, the capitalist mode of production has been self-regulating in order to play its role as a superior instrument for human development, as compared to the feudal and slavery modes of production. In this sense it looks for its expansion and renovation through dominating new markets in order to sell its products. Hypothetically, this is the path followed by capitalism to refresh itself and continue to deliver goods for human consumption. It seems, then, that goods are “democratized”, since they are taken out from the privileged feudal circuit and are sold according to a certain price and bought thanks to resources proceeding from a salary. Nevertheless, those roads are now closing due to some markets exhaustion by saturation, or because of the lack of necessary investments to create them. This is what happens with poor countries that have no financial muscle for any plan of production because they don’t have the resources to become consumers, among other problems. For example, this is the situation of quite a few African countries and our dear Haiti in Latin America.

When such a situation occurs, those who want to maintain the status quo maneuver to overcome the crisis of the capitalist mode of production, recurring to the ideological and law superstructure.

The economic crisis suffered by the United States of America in 1929, with heavy repercussions upon Europe, was overcome by anti-liberal measures taken by Franklin Delano Roosevelt from the very beginning of his first presidency in 1933. President Roosevelt attended to the economical conjuncture by creating the Tennessee Valley Authority, an enterprise designed to impel an extremely depressed area and provide employment and development. In the same sense, he created the Financial Reconstruction Corporation in order to help banks with federal money. Measures were taken to create more employment. Roosevelt also made and contracted building construction from the Federal Government budget. Up to now these buildings still lodge public offices in counties and districts all over the country. He also raised salaries.

The political right started a public campaign to stigmatize Roosevelt as a dangerous representative of communism. In order to issue the necessary laws to put in action these economical interventionist measures, his government was unable to rely on the Bars of Lawyers, because they refused to supply candidates to fill the posts equivalent to our Attorney General, ministries or counselors to the National Assembly. It was then, stimulated by Roosevelt, that the National Lawyers Guild was founded and integrated by leftist lawyers who supported the Democrat government. The Guild is still active and its members are universities professors and lawyers dedicated to defending the best causes of justice. The reason why this is pertinent is to pay homage to the name of Leonard Weinglass (who recently passed away), a lawyer who graduated in 1958 at Yale University and a member of the Guild since his days as a student. He actually led the legal staff defending the five Cuban patriots I also feel honored to mention, that is: Antonio Guerrero, Fernando Gonzalez, Gerardo Hernandez, Ramon Labañino and Rene Gonzalez.

In order to make clearer the Roosevelt government activities, we can say that the measures taken by him necessarily passed through the formation of laws appointed to safeguard the capitalist mode of production. In this sense we can recall the Banking Law of June 16, 1933, also known as the Glass-Steagall Act, promoted by Senators Carter Glass and Henry Steagall.    

Let us examine the principal characteristics of this law:

1) The total separation between banking and stock exchange activities.

2) The banking net should be national, for states, or local territories, and financial institutes could not possess more than 18% of net capital, according to antimonopoly regulations.

3) Banks were not allowed to manage pension funds.

4) Bankers were not allowed to be members of the Board of Directors of industrial, commercial, or service companies.

5) A prohibition for banking entities to have shares in other companies or participate directly in the stock exchange market; they only could obtain from the stock market up to 18% of their own capital and were not allowed to do it through brokers related to their firms.

6) An autonomous control commission was created, the SEC (Securities and Exchange Commission).

By the way, the first Director of the SEC was Joseph Kennedy (John Kennedy’s father). Under his management, one of the most affected oligarchs was Prescott Bush (George W. Bush’s grandfather). From this episode we can speculate about the antipathy generated between these two clans of North American politics.

Fifty-two years later, in 1985, during Ronald Reagan’s presidency, banks were allowed to operate as investment counselors to capture public resources and to manage great investment funds related to the banks. Bill Clinton, Reagan’s successor, increased the capital capture limit by means of banking shares allocated in the stock exchange market, from 18% to 25%. The bankers organized off-shore operations in countries considered fiscal paradises, such as the Bahamas, the Cayman Islands, Panama, the Isle of Man, uxembourg, Monaco, Lichtenstein, etc. The era of non-regulations arrived and banks acted without impediment, managing at their fancy the savings of the public.

Up to now, it seems clear enough the way the law adjusts to the capitalist mode of production necessities. When needed, the State intervenes to save capitalism, issuing the required regulations, and when they turn out unnecessary, they are modified, derogated, or not applied.

One of the last capitalist adjustments was so-called globalization, the search for the entire market of the planet. One leg of this tripod’s strategy was free-trade agreements with its reciprocal tariff concessions. The second leg was financial market control and money manipulation. The third leg was the search for cheap labor in underdeveloped countries. The latter leg allows capitalists to recover the internal market from outside and to overpower the competition issued from the first leg of the strategy, i.e., the low custom duties produced by free-trade agreements.

Theoretically, this strategy seems perfect to its creators. Nevertheless, up to now, it has not been so in real practice, for several reasons. Let us take only one of the current systemic problems, spread by the world-wide press, the financial crisis derived from the real estate bubble occurred in North America.

The crisis begins with big money surpluses obtained by exporters from countries under free-trade agreements and from Asiatic and Centroamerican authorized producers, where workers are exploited with very low salaries, enlarging the merchandise plus-value. This surplus money necessarily goes to banking accounts and financial institutions. At their turn, these institutions must make investments to be able to pay some profit to bank owners and revenues to depositors. But once the investment spaces resulting are insufficient to receive such large sums of money, it is mandatory to resort to imaginative financial engineering in order to find new forms of investment. It is then ingenious publicity campaigns begin in order to allocate loans with first or second degree mortgages. Restructured notes packages are issued with good, regular and high risk debt, with an attractive rent. When the first default of payments occurs the situation turns worse because the solution was to increase the high risk allocation in the packages offered to investment banks with attractive interests. And the banks, in turn, made the same with their depositor-investors. When, finally, the deferred payment weight became unbearable, the crisis broke out and prestigious investment banks and financial entities cracked into bankruptcy. There were no money devolutions, not even partial ones, for depositors requiring capital to re-invest in their companies. This situation caused firms to close down or have production decreases, with unemployment resulting. Moreover, the mortgages were executed and hundred thousands of families were left without housing. Alarm bells were heard and once more the capitalists requested the State intervene in order to save the system. The State responded, but the ideological, legal, and political superstructures of the capitalist mode of production reacted only to allow the transference of great sums of federal money to the same broken entities, in order to strengthen them, instead of circulating the financial assistance from the bottom up by means of granting loans to mortgage debtors so they could pay their debt to the banks and save their homes. In both cases the consequences would have had the same effect, the capitalization of the companies, but the second solution was simply unthinkable due to its incompatibility with the capitalist system’s ideology.

However, it seems that nowadays the space for maneuvering in order to save the capitalist mode of production is becoming narrower. According to a Home Welfare Study carried out by the North American Census Office in 2009 but recently published, that year the number of people in living in poverty was 43,600,000. Actual unemployment continues to stay at 10% and, consequently, consumption does not grow. External trading begins to yield facing a colossus like China, who does not subdue to money revaluation requests in order to make North American products more competitive. The situation is so difficult by now that the Treasury Secretary recently declared that the United States is at the edge of insolvency. He also requested an increase in the public debt roof, which actually amounts $14.3 billion, because it lacks the money. With the monthly rate deficit of $80 million dollars, the roof will be reached in five months.

In Spain several real-estates bubbles cracked and there are others pending. Ireland is submerged in a banking crisis. Neither Greece nor Portugal were able to pay their external debt. Japanese exports fell to their lowest level in many years. In 2009 Toyota Motor Corporation acknowledged their first losses in sixty years and Toyota City is hurt by unemployment. Let us consider what would occur if a credit card bubble explodes now? By the way, the credit card system is actually under observation.

Are we reaching capitalisms final crisis because there is no way to refresh it, because it is deathly wounded?

Let us read what was asserted by Vicente Verdú in another book, “Capitalism funeral”: “From the very birth of capitalism, crisis periodically occurred every twenty-two months between 1854 and 1919, and for the last two decades, with an interval of three trimesters. During almost all of them the government has been obliged to intervene in order to re-establish the balance, but always on different fields. Precisely the gravest tessitura contributed to alert the system to actualize its instruments and renovate its technological endowments such as its future organization and ideology. This does not mean any cosmetic operation, neither an opportune martingale for the system recuperation, but it simply refers to the necessary capitalist twist in order to perform its indispensable metamorphosis inasmuch as a living organism. Nevertheless, the difference between this time and other adverse periods lies in that in the present case it seems that the system is moving not in order to re-accommodate itself, but is showing signs of anguish and unexpected consternation marks… Wars – as though as crisis – blow up due to a simple little spark, whether in the case of Archduke Franz Ferdinand murdered in Sarajevo, whether in the case of subprime mortgages. But there always are some warning announcements that the great explosion is near and will be unavoidable. By now the presage seemed to lie in the excessive price of apartments or the corrupted golf fields undoing orchards as plagues. The world, here and there, was preparing for an explosion, the bomb was fed by international terrorism, organized crime, the rabble economy, the media fallacy, the real-estate, furniture or food speculation. This situation, in all circuits, was creating a fiction or a double face siding the reality, and from this contiguity started to prepare a thunderous discharge as the most contemporaneous form of being… The great convulsion in which we find ourselves at the beginning of XXI Century shows characteristics of the end of an era, but also, logically, it appears as an epoch-making (the beginning of an epoch)… The capitalism of fictions has this precedence leading the crisis as the final apotheosis”.

If the capitalist mode of production succumbs, as occurred with slavery and feudal modes of production, we have no doubt the socialist mode of production will be the substitute, as asserted by Istvan Meszaros in his book “Socialism or Barbarism”. There is no other. With the necessary adjustments according to time and place, of course, but whenever this historical moment happens, socialism will take the place of capitalism in the more capitalist countries of the world.

The transition of time in historical space comes from the millennium, passing through centuries, decades, lustrums, years and months, up to this very moment. Nevertheless, when examining history, we can observe that lapses between the substitutions of the modes of production, have passed from millennium to centuries, and that capitalism has already surpassed its secular stage.

Taken from the Speech of Order delivered in the Ceremony of the Judicial Year Opening of 2011, in the Supreme Tribunal of Justice. Caracas, Bolivarian Republic of Venezuela.   

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